Refinancing Your Car with Bad Credit

Refinancing Your Car with Bad Credit

Just a few years ago the stated desire of refinancing your car when you have bad credit would have brought a rendition of the “Good Luck” chorus, today though, there are more opportunities than ever before.  With the advent of online finance companies, the problem of bad credit is less devastating and restrictive.  That does not mean that you should ignore your credit score, on the contrary, you should do all that you can to improve it.

Improving Credit Score

You can improve it many ways; unfortunately, in today’s world it may take time.  Up to half of Americans have had trouble with medical bills and those will stick to you like Velcro for 7 years.  Repossession of a car is another one that sticks, but of the two, the repossession is worse.  Many loan officers understand that “everyone has trouble with medical bills” and tend to give it less weight in the financing or refinancing decision.  Repossession is, generally, seen as a choice and will weigh heavily.  However, details like voluntary returning of the vehicle may be less damaging. 

Bankruptcy is another one that may not be a huge impediment but slow payment is a killer almost every time.  Bankruptcy can be caused by any number of things, health, loss of a job, or other unforeseeable events, slow payment on the other hand is often seen as you borrow too much or you do not care.  Neither item is great in the finance industry, but there are ways around it.


Let’s say you want to refinance your car to a lower rate, or a lower payment. The first thing that you would need to do is make sure that the car is worth more than you want to borrow. One of the worst things that has happened to consumers is the sign and drive loan.  With a normal down payment, you pay the taxes, fees and a bit on the car.  The depreciation will occur no matter what, but with the sign and drive loan, the last thing that you pay is the taxes and fees. It will raise your payment and may make your loan longer.  It also makes it more difficult to refinance a car, because taxes and fees are no part of the value of the car.

To reclaim your credit you may get a secured credit card.  You have already put up the money that will be used to pay the bill if you default, but you can use the credit aspect to improve your credit score.  Making sure that you do not bounce checks and make, at least, some effort at saving will also help you. Anything that you can do to show personal responsibility will help you in your quest for a loan.

Creditors will see trends and actions more so individual items. If you make a practice of paying back what you can and keeping up new debts, that will speak well of you as a responsible consumer. You seek to improve your life through refinancing, and that’s a good thing.

Online Opportunities

Online opportunities may be your best choice. Brick and mortar banks and Credit Unions have a steady upkeep to maintain and they may require higher premiums and better credit scores.

Now, having said all of that, if you have previously paid off your car and have the title, then you are “golden.”  You will be able to get a loan, somewhere, but most of the caveats listed above still apply. Your best bet would be to avoid the pawnshops and loan sharks and check out the opportunities online. Looking towards a less traditional form of lending may be the best option, and it may be available at better rates than you think.

You still have to assess if the loan is needed and if you are you able to pay it back on time.  You also have to assess if you really need what you are borrowing it for.  Do you need the car and can you justify the expense, in terms of getting work income from it?

If the answer is positive to both questions, then make your plans and then apply. Make sure that you use the money for what you have designated it for.  Rehabilitating your credit will not be far behind and it will be a great day of accomplishment when you realize your FICO score has gone back up!